Where does a DeFi dispute happen?

Decentralisation does not eliminate law

A smart contract can operate without a traditional office, signed paper or single administrator. That does not mean the dispute has no jurisdiction. Courts and tribunals may examine the parties’ location, representations, governing-law clauses, front-end operator, developer control, token issuer, place of loss, custody arrangements and the location of identifiable assets.

The difficulty is that these factors may point to different forums. A protocol can have governance in one country, developers in another, users worldwide and assets recorded on a distributed network. The first strategic task is therefore to identify the human and corporate actors behind the technical system and the relief each forum can grant against them.

Code, contract and representation

Not every executable instruction is the whole contract. Website terms, governance proposals, white papers, private messages and the parties’ conduct may contain promises or limitations that sit around the code. A vulnerability may produce the outcome permitted by the code while still raising questions of misrepresentation, breach of duty, unjust enrichment, mistake or unlawful conduct.

Dispute clauses should be designed for the actual structure. They should address governing law, arbitration or court jurisdiction, service, emergency relief, evidence preservation and the legal status of electronic execution. Boilerplate copied from a conventional software agreement rarely addresses protocol governance, oracle failure, upgrades or control over administered functions.

Relief must follow control

Even when jurisdiction is established, an order against a fully autonomous protocol may accomplish little. Effective strategy targets persons or entities capable of acting: developers with administrative keys, multisignature signers, interface operators, custodians, issuers or recipients of traceable value. The architecture of control is therefore also the architecture of remedy.